The decision to counter a spell or destroy a permanent is a decision made on announcement before the target is selected. If the spell is redirected, this mode can't be changed, so only targets of the selected type are valid.

9/16/2007

Note that Hydroblast can target any spell or permanent, not just a red one. It checks the color of the target only on resolution.

9/16/2007

If there are no legal targets for either of the modes, you can't choose that mode.